The bear market in gold intensified Monday with frenzied selling knocking the yellow metal down more than 8% and below the key $1,400-per-ounce level.

At 11:50 am ET, gold was down $127.80 or 8.5%, to $1373.60 an ounce. Gold, often viewed as a haven in tough times and a hedge against inflation, is down more than $515 from its all-time high of $1,888.70 on Aug. 22, 2011.

The 27.3% drop from its all-time high puts in deeply in bear market territory. It is gold's worst bear market drop since a 39% plunge Jan. 2, 1996 through Aug. 25, 1999, according to Bespoke Investment Group. The average gold bear market has sliced nearly 32% off gold's price, according to Bespoke.

On Monday, a slowdown in Chinese economic growth added to doubts about the strength of the world economy and raised the specter of a deflationary environment taking hold. It also raised fears that Chinese consumers, who are big buyers of gold jewelry, would buy less.

Investors' trashing of gold Monday follows a 5% plunge Friday. The two-day selloff is the worst since 1980.

Rich Suttmeier, chief market strategist at ValueEngine.com, suspects the selling is also being fueled by selling by big investors, such as hedge funds and pension funds, that are looking to stem their losses as well as reduce exposure to a hard asset. Hedge funds typically use leverage, or borrowed money, to boost their profit potential. But it also forces selling when prices drop sharply and they are asked by lenders to put up more collateral.

In recent years, an increasing number of investors, big and small, have started to treat gold as a key "asset class" in their asset allocation, and have upped their stakes in gold as a result.

Suttmeier says the heavy selling has the feel of a bubble bursting, adding that rumored selling by the nation of Cyprus to meet obligations to European financiers is intensifying the downdraft.

Even retail investors are getting caught in the downdraft. The SPDR Gold Shares exchange traded fund, the most popular ETF, has also suffered a drop of almost 8% today.

The bigger-than-expected first-quarter slowdown in China has investors worried more about deflation than inflation at the moment. And given that gold is viewed as an inflation hedge, investors are selling gold more aggressively, says Chris Blasi of Neptune Global Holdings, a precious metals trading and research firm.

"Where is the bottom? I don't know. The selloff could go on another day or two," says Blasi.

Another big factor driving the selling is the fact that traders were watching the key $1,520 level on Friday, and when gold sank below that line in the sand, many investors decided it was time to get out, says Gary Kaltbaum, president of Kaltbaum Capital Management.

"Gold was a very over-owned and a very big bull market and when it broke support, the masses got out," says Katlbaum. "When the big money guys own a boatload of stuff, and are all watching the same number, when support breaks, I call it the 'give up, we are done' response."

Analysts attributed last week's plunge to investors who fear gold won't be the safe haven it has been when inflation spikes, the economy deteriorates or the sale of gold to raise cash skyrockets.

As recently as mid-September, gold prices were flying above $1,800 an ounce.

The yellow metal has now hit a two-year low amid concerns that a 12-year bull run for the commodity has come to an end.

Oil prices were also seeing steep declines on Monday. Crude prices were down nearly $3 a barrel to $88.21 per barrel.